A.  Popular discussion of the environment frames the debate in terms of right and wrong.  But economists emphasize marginal cost and marginal benefit of environmental issues.
B.  External costs are costs of production that fall on people other than the producer of a good or service.  Marginal social cost equals marginal private cost plus marginal external cost.
C.  Producers take account only of marginal private cost and overproduce when there is a marginal external cost.
D.  Sometimes it is possible to overcome an externality by assigning a property right.
E.  The Coase Theorem states that if property rights exist and are enforced, private transactions are efficient - there are no externalities - and the same efficient amount of pollution is achieved regardless of who has the property right, the polluter or the victim.
F.  When property rights cannot be assigned, governments might overcome externalities by using emission charges, marketable permits, or taxes.

 9.1  Explain why negative externalities lead to inefficient overproduction and how property rights, pollution charges, or taxes can achieve a more efficient outcome.

 9.1   Explain why negative externalities lead to inefficient overproduction and how property rights, pollution charges, or taxes can achieve a more efficient outcome.

A.  Popular discussion of the environment frames the debate in terms of right and wrong.  But economists emphasize marginal cost and marginal benefit of environmental issues.
B.  External costs are costs of production that fall on people other than the producer of a good or service.  Marginal social cost equals marginal private cost plus marginal external cost.
C.  Producers take account only of marginal private cost and overproduce when there is a marginal external cost.
D.  Sometimes it is possible to overcome an externality by assigning a property right.
E.  The Coase Theorem states that if property rights exist and are enforced, private transactions are efficient - there are no externalities - and the same efficient amount of pollution is achieved regardless of who has the property right, the polluter or the victim.
F.  When property rights cannot be assigned, governments might overcome externalities by using emission charges, marketable permits, or taxes.

Take the optional post-study bonus point quizzes on Externalities on Saturday following Module 4.

Get ready (finalize your handwritten notes and put batteries in your calculator) for a review session and prepare to take Exam #1 during Module #5.

Take the optional pre-study bonus point quizzes on Production and Cost on Sunday preceding Module 6.